PROFIT-LOSS: Latin governments battle upward pressure on FX

Most Latin currencies are nudging up again on domestic consumption and soaring soft commodity prices, which are tempering the effect of weaker hard commodities. The big unknown is government intervention, which is stymying the rise of both the BRL and CLP.


Latin currencies are starting to feel some giddiness. At the beginning of August, Morgan Stanley revisited its foreign exchange predictions, focusing particularly on Latin America. “We generally expect to see EM currencies rallying over the coming months …. we think that valuations are attractive, while positioning in EM currencies is generally light,” according to James Lord, emerging markets strategist in London at Morgan Stanley.


The Brazilian real is likely to strengthen from current levels as the economy recovers and soft commodity prices continue to rise. “We expect the Brazilian real to strengthen to 1.90 for year-end based on our economics team’s view that China will post a recovery later this year,” says Lord. The real was trading at 2.016 to the US dollar on August 20.


That rise might seem counter-intuitive. After all, oil giant Petrobras is having well-publicized difficulties in its exploration of Brazil’s vast but deep pre-salt discoveries while iron ore prices, Brazil’s key hard commodity, are still under pressure. In August, iron ore fell through what is often cited as a key trading ‘floor’ of $120 per tonne and its decline has even accelerated with prices falling as low as $111 in mid-August.

This is the start of an article that looks at major currencies in the Latin region and predicts their direction. To see the full article, please go to the Profit-Loss website ( 

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I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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